C.A. Affirms Order to Nephew of Decedent to Give Up Monies Taken From Bank Account
Opinion Says Fiduciary Duties As Attorney-in-Fact Were Breached
In Not Recognizing Funds As Assets of Uncle’s Family Trust
By a MetNews Staff Writer
The Fifth District Court of Appeal has held that a man who helped his ailing uncle manage his financial affairs and was made a signer on his bank account five months before his death, and given a power of attorney two months before the uncle died, breached his fiduciary duties by withdrawing and pocketing nearly $250,000 from that account rather than treating the funds as assets of the family trust, of which he became the trustee.
Justice Mark W. Snauffer authored the partially-published opinion, filed Tuesday. It affirms an order by Kern Superior Court Commissioner Andrew B. Kendall, other than to direct that a computation be corrected.
Kendall’s order requires that defendant Christopher Guadarrama (referred to by Snauffer as “Chrstopher”) turn over to the trustee who succeeded him, after he was removed by Kendall from that position, monies taken from the account both before and after his uncle, Albert R. Pool, died.
Chronology of Events
On Sept 8, 2017, Pool added Guadarrama as an authorized signer on the bank account; on Oct. 23, 2017, the nephew deposited $99,720.46 of his uncle’s funds into that account; on Nov. 30, 2017, Guadarrama plunked another $104,922.07 of Pool’s money into it.
The opinion notes:
“Christopher was unable to testify as to the source of the funds for these two deposits. He had no recollection of making the deposits.”
Guadarrama withdrew $42,059 from the account before Pool died on Feb. 28, 2018.
Subsequently, Guadarrama wrote a check from the account in his favor in the amount of $200,000, then made another check payable to him in the amount of $50,000. Three beneficiaries of the trust sued, and prevailed.
Guadarrama appealed, notwithstanding that in doing, an even brighter spotlight would cast on his activities through the issuance of a Court of Appeal opinion, which could conceivably spark consequences undesired by him.
Probate Code §4264
Snauffer’s opinion relies upon Probate Code §4264 in concluding that Guadarrama breached his duties under the power of attorney (“POA”) in diverting bank account funds to himself after his uncle died. That section says, in relevant part:
“An attorney-in-fact under a power of attorney may perform any of the following acts on behalf of the principal or with the property of the principal only if the power of attorney expressly grants that authority to the attorney- in-fact:
“(c) Make or revoke a gift of the principal’s property in trust or otherwise.
“(e) Create or change survivorship interests in the principal’s property or in property in which the principal may have an interest.
“(f) Designate or change the designation of beneficiaries to receive any property, benefit, or contract right on the principal’s death.”
“We conclude Christopher’s deposit of the subject funds in the amount of $204,642.53 violated section 4264, subdivision (e) by creating a survivorship interest in the subject funds in his favor. Christopher’s deposit of the subject funds violated section 4264, subdivision (f) by effectuating a change in the designation of beneficiaries who would have otherwise shared in the entitlement to the subject funds. Finally, Christopher’s deposit of the subject funds was tantamount to gifting the funds to himself in violation of section 4264, subdivision (c).”
The justice elaborated:
“He failed to keep the deposits separate and distinct from other property and, instead, deposited the funds into an account that did not clearly identify the property as belonging to Albert. He did not avoid the conflict-of-interest that presented itself in depositing funds into a joint account to which Christopher had unfettered access in his personal (as opposed to fiduciary) capacity. He did not keep a record of the transactions involving the subject funds which were the two largest deposits ever made to the joint account as reflected in the record on appeal.”
“Christopher’s interest in the joint account was held in Christopher’s individual capacity. That is, he was not named to the joint account in the capacity as attorney-in-fact for Albert. A prudent person acting as attorney-in-fact would have put the subject funds in an account that only Albert or his attorney-in-fact, acting in such capacity, could have accessed.”
Snauffer pointed out that the instrument creating the power of attorney did not grant the nephew the power to create a survivorship. Pointing to subds. (c) and (e) of §4264, he said:
“There is no evidence that Albert instructed Christopher to deposit the funds into the joint account, that Albert intended for this money to be deposited in the joint account, or that Albert knew the money was deposited into the joint account. The survivorship interest in the subject funds was created by Christopher at a time when Albert’s health was failing and his death was likely imminent. Whether couched as a ‘gift’ or the creation of a ‘survivorship interest,’ the act of depositing the subject funds into the joint account violated section 4264.”
He noted that “even had evidence existed to demonstrate that Albert wanted Christopher to have the subject funds, the lack of any written document authorizing Christopher to deposit the monies into the joint account would be fatal to Christopher’s appeal concerning the subject funds.”
Prior to Death
Kendall also correctly determined that Guadarrama must turn over to the substitute trustee monies taken from the bank account before the uncle died, Snauffer said. He recited that the power of attorney specified that Guadarrama could make gifts to himself “not to exceed the annual federal gift tax exclusion,” and declared:
“Only Albert’s money was deposited in the joint account. Thus, during Albert’s lifetime, the money in the joint account belonged to Albert alone….Christopher’s personal withdrawals from the joint account during Albert’s lifetime were, according to Christopher, performed under the authority of the POA. Under the POA, however, he was limited from making gifts to himself in excess of $14,000, the federal gift tax exclusion.”
“There is no evidence Albert approved the withdrawals or an increase in the gift amount limitation. Thus, Christopher’s withdrawals from the account in excess of $14,000 were outside his authority under the POA. Although he had the power to withdraw from the joint account by virtue of the fact he was a joint holder of the account he did not have the right to make the withdrawals as attorney-in-fact absent express written authorization.”
The case is Pool-O’Connor v. Guadarrama, F083954.
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